Freedom Won, Freedoms Lost?

by | Nov 13, 2014

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Mark Canning, Head of Business Development at Yorsipp Ltd, takes a look at the self-administered pensions market:

The self-administered pensions market has long been associated with “freedom of choice” – whether that is in the range of investments offered, or the manner in which retirement income is drawn.

It is not surprising then to see industry experts predict the market to potentially double in size over the next few years – fuelled by the changes announced in the Budget regarding widened retirement income options – with estimates of two million plans holding assets of £300bn by 2017 being muted.

One of the most popular investment types held by SIPP and SSAS arrangements is in commercial property. However, somewhat surprisingly, this is increasingly an area where the aforementioned choices start to narrow.

A typical example of this is the growing trend of many operators to insist upon a “panel” of mandated suppliers – e.g. for legal work, valuation reports, insurance and so on.

It strikes me as odd that those providers who source their business via intermediaries, are effectively penalising a potentially major source of business introduced via the adviser’s own professional connections. Take a simple example where a “non-panel” solicitor introduces a property purchase case via an adviser. Often that adviser will be faced with the dilemma that if he makes a recommendation to purchase the property via a SIPP his client may either not be able to use their preferred solicitor at all, or he may have to pay an additional fee to do so.

Further evidence of narrowed choices includes clients who may wish to jointly purchase premises with a third party – such as the client’s firm or themselves acting in a private capacity. Increasingly, we are seeing evidence that such “split title” transactions are being rejected by some operators.

We hear a lot of rhetoric in the financial services industry regarding “putting the customer at the heart of what we do” – as if this is a new initiative rather than the cornerstone on which every business should be built upon.

Whilst we can understand the synergies that a preferred supplier basis may bring for the supplier, it is less obvious how these help the client. Ask yourself who is more likely to pull out the stops on a Friday afternoon to help complete a purchase – the solicitor your client has known and trusted over many years, or a firm they have possibly never heard of at the other end of the country?

As the 2015 changes come ever closer, and strategies for providing lifetime income at the forefront of adviser’s minds, we expect to see a surge in commercial property transactions which can provide strong rental covenants to support income requirements – whether these be on an owner occupied or buy to let basis.

The future looks bright for the self-administered market in general and the relative attractiveness of property as an asset class within it. We believe it is right to ensure that clients can employ their own range of trusted advisers as and when the opportunity presents itself.

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